1. Introduction:

In today’s universe. clients frequently face a quandary about whether to purchase or rent. Lease is an understanding in which one party additions a long term rental understanding. and the other party receives a signifier of secured long term debt. On the other manus. purchasing involves transportation of ownership from marketer to purchaser. Buying or renting determination depends largely on customer’s penchant. There are many factors to see before taking a purchasing or renting determination. 2. Factors Influencing Buying vs. Renting Decision:

Following are the factors a client should see before taking a purchasing or renting determination.

3. 1. Advantages of Leasing:

1. Low monthly payment: Monthly rental payments are 30-60 % lower than purchase loan payments for the same point. 2. Small or no down payment: There is no down payment required for most lease contracts. But some promotional trades require a little down payment. 3. Limited liability: The client merely pays for the portion he/she really utilizations. For illustration. monetary value of a auto is $ 20. 000 and expected monetary value of the auto is $ 13. 000 after three old ages. If person leases that auto so he/she will pay merely $ 7. 000. 4. Tax: Customers pay revenue enhancement merely for the sum they use non for the full value of the point. 5. Care cost: Most people lease for a term that matches with the fabrication guarantee for that point. so that they do non hold to pay care cost. 6. Flexibility: Customers have the flexibleness to utilize latest merchandises. For illustration. if a client leases a auto for 3 old ages. so after 3 old ages he/she can rent the latest auto available. 7. Gap Coverage: Most automobile rentals include gap coverage. So clients are better protected in rental in instance of stolen points.

3. 2. Disadvantages of Leasing:

1. Early expiration cost: If a client terminates rental before terminal of the contract. so expiration cost is normally really high. 2. No ownership equity: One of the biggest disadvantages of rental is that clients pay without acquiring any ownership in the point. 3. Excessive milage charges: In instance of car leasing. there is a punishment for inordinate milage. So the clients don’t have the freedom to every bit much as they like. 4. Punishments: If the status of the leased merchandise is non up to standard so clients have to pay punishments. For illustration: If a client returns a chartered vehicle at lease-end with inordinate dents. abrasions. or unrepaired accident harm. he/she will be charged. 5. Customization: Customers can non make any customization of the leased merchandise. For illustration. many people like to custom-make their auto. but if it is a chartered auto than they can non custom-make it. 6. Credit Requirement: Geting a loan to purchase is frequently easier than acquiring a rental. 7. Insurance: Often insurance premium on a leased point is more than for a purchased point. For illustration. insurance premium on purchased autos is less than insurance premium on chartered autos.

3. 3. Advantages of Buying:

1. Ownership: The biggest advantage of purchasing is ownership. For illustration. when person buys a auto than he/she has the ownership of the auto. 2. Customization: Customers can make whatever customization they like. For illustration. a client can modify his auto the manner he likes. 3. Flexibility: Buying a merchandise gives the right to utilize that merchandise anyhow he/she wants to utilize. For illustration. when person buys a auto. there is no milage limitation. 4. Resale: Buying a merchandise gives the client right to sale it anytime. So clients can sell their merchandises and acquire some resale value. 5. Income: Peoples do non required to hold a stable income to purchase. For illustration. I am a pupil so I don’t have stable income but I can still purchase a auto if I have the money to purchase it. 6. Insurance: insurance premium on a purchased point is less than for a chartered point. 7. Long term cost: Long term cost of purchased merchandises is less than for chartered merchandises. A client can utilize a merchandise for many old ages so the long term cost is less.

3. 4. Disadvantage of Buying:

1. Down payment: For purchase loans normally clients are required to do a large down payment. 2. Monthly payments: Monthly payments for purchase loans are higher than for rental. 3. Depreciation: The minute a merchandise is sold it is considered as used merchandise and monetary value of the merchandise is less. There are some exclusions to this regulation as land ; gold etc. normally appreciates over clip. For other merchandises clients are really purchasing merchandises that will deprecate over clip. 4. Care: Care cost is high for purchased merchandises as after fabricating guarantee runs out clients need to pay care cost. 5. Technology: In today’s universe engineering alterations quickly.

By purchasing a merchandise a client is stuck with that merchandise or necessitate to sell that merchandise at depreciated monetary value to acquire latest merchandise. 6. Life programs: Buying may be disadvantageous to people who are anticipating alterations in their life. For illustration. from a individual professional person can go a parent of three in 3 old ages. So for him/her selling a compact auto after three old ages and replacing it with minivan is would be more expensive so renting the first auto and simple returning it. 7. Hassle of disposing: For purchased merchandises a client needs to take the fuss of selling or recycling it.

3. Lease vs. Buy Scenario:

Now I am traveling to compare between purchasing a auto vs. renting a auto. For this intent I am presuming the client is traveling to take a purchase loan. Another premise is that the client is traveling to purchase a $ 23000 auto. Now I am traveling to compare rental with 0 % and 6 % loan for the same length. Table: Lease vs. Loan

| Lease- 6 % | Loan – 0 % | Loan – 6 % |
Car Price| $ 23000| $ 23000| $ 23000|
Down Payment| $ 1000| $ 1000| $ 1000|
Interest Rate| 6 % | 0 % | 6 % |
Residual| $ 11000| n/a| n/a|
Months| 36| 36| 36|
Payment| $ 388. 06| $ 611. 11| $ 669. 28|

From table 1. 1 we can see that the monetary value of the auto is $ 23000. Down payment is besides same for rental and loan which is $ 1000. We can besides see that rent monthly payment is much less than 0 % and 6 % loan. But monthly payment entirely should non be considered when make up one’s minding purchasing or renting a auto. Buying or renting determination depends on the customer’s penchant. In the above chart monthly payment is much less for rental but no ownership is involved in this option. In loan options. after three old ages client really go the proprietor of the auto. Many prefer to have a auto instead than renting it.

4. Decision:

To reason I would wish to state purchasing or renting determination depends largely on people’s penchant that means which factors are more preferable or most of import to the client. Some people prefer ownership above all other factors and some people prefer to utilize latest merchandises. I would ever prefer leasing over purchasing because of the chance to utilize latest merchandises. its attractive monthly payments. limited liability. Technology alterations quickly. For illustration a latest laptop becomes outdated within two old ages ; a latest auto becomes outdated in 3-5 old ages. So leasing is a much better option for utilizing latest merchandises. Another thing is monthly a payment of rental is much lower than purchasing. Furthermore in instance of rental the client is merely paying for the sum he/she is utilizing. So in my sentiment leasing is a better option than purchasing.

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[ 1 ] . A type of car insurance to protect auto proprietors against losingss that can originate when the sum of compensation received from a entire loss does non to the full cover the sum the insured owes on the vehicle’s funding or lease understanding. [ 2 ] . Standards established by creditors that must be satisfied by possible debitors in order for recognition to be given.